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Management's Discussion and Analysis-Continued <br /> March 19,2004 <br /> STATEMENT OF REVENUES,EXPENSES,AND CHANGES IN NET ASSETS <br /> While the Statement of Net Assets shows the change in financial position of net assets,the Statements of Revenues,Expenses, <br /> and Changes in Net Assets,provides answers as to the nature and source of these changes. As can be seen in Table A-2,the <br /> "Increase in Operating Expense" was the main source of the decrease in net assets of$216 thousand in fiscal 2003. A closer <br /> examination of the individual categories affecting the source of changes in net assets is discussed below: <br /> TABLE A-2 <br /> Condensed Statement of Revenue, <br /> Expenses,and Changes in Net Assets <br /> (In thousands of dollars) <br /> Fiscal Fiscal Total <br /> Year Year Dollar Percent <br /> 2002 2003 Change Change <br /> Revenue <br /> Operating revenue $ 12,006 $ 14,044 $ 2,038 17.0% <br /> Non-operating revenue 1,199 1,270 71 5.9 <br /> Total revenue 13,205 15314 2,109 16.0 <br /> Expenses <br /> Operating expense <br /> Depreciation expense 1,262 1,652 390 30.9 <br /> Other operating expense 9,794 11,646 1,852 18.9 <br /> Total expense 11,056 13,298 2,242 20.3 <br /> Income before transfer to City 2,149 2,016 (133) (61.9) <br /> Transfer to City (263) (346) (83) 31.6 <br /> Change in net assets 1,886 1,670 (216) (11.5) <br /> Net assets,January 1 (2002 and 2003 restated) 19,265 23,504 4,239 22.0 <br /> Prior period adjustment 2,353 9,881 7,528 319.9 <br /> Net assets,December 31 23,59±1 $_______15„055 $___ 11.551 49.1% <br /> Revenues <br /> Table A-2 shows that operating revenue increased by 17 percent in 2003 for the Water and Electric Departments combined. This <br /> increase was due mainly to customer growth and rate increases. <br /> Total Expenses <br /> In reviewing total expenses in Table A-2 you will notice that there was an increase of 20.3 percent overall. The Electric <br /> Department experienced an increase of 16 percent in operating expenses,while the Water Department's operating expenses <br /> increased by 68 percent. The increase in operating expenses for the Electric Department mainly resulted from the combination of <br /> purchased power and power production increasing by$937,292 over 2002 or 13 percent. The increase in operating expenses for <br /> the Water Department resulted mainly from depreciation.This increase came mainly from the assets added from prior years. <br /> -III- <br />